Services Marketing An Introduction

Ms. Geetanjali Gulati

The definition of marketing is: Marketing is an organizational function & a set of processes for creating, communicating & delivering value to customers for managing customer relationship in ways that benefit the organization & its stake holders.

Offering Products & Services that Satisfy Customer Needs

SERVICE BECOMES THE KEY WORD TO CUSTOMER SATISFACTION & CUSTOMER LOYALTY

Home Delivery Service

Laundry Service

Talking on Telephone Getting a Hair Cut

Travelling Service

Courier Service

Listening to Radio

Placement Service

Internet Connections

Photocopying Service

Counseling Services

Cafeterias

Defining the Essence of Service:

An act or performance offered by one party to another An economic activity that does not result in ownership A process that creates benefits by facilitating a desired change in:
Customers themselves Physical possessions Intangible assets

Defining the Essence of Service:

A service is an act, deed or performance of an intangible nature that does not result in ownership of a tangible commodity but creates value and benefits for the customer Value in forms of convenience, timeliness, amusement, comfort or health

Examples of Service Industries:

Classification of Services by Industry:

Health Care Hospital, medical practice, dentistry, eye care Professional Services Accounting, legal, architectural Financial Services Banking, investment advising, insurance Hospitality Restaurant, hotel/motel, bed & breakfast, ski resort, rafting Travel Airlines, travel agencies, theme park Others: Hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

The Services Marketing Triangle

Company (Management)

Internal Marketing
enabling the promise

External Marketing
setting the promise

Employees

Interactive Marketing
delivering the promise

Customers

Characteristics of Services

Intangibility

Heterogeneity

Simultaneous Production and Consumption

Perishability

Characteristics of Services

Intangibility
Customers cannot see, touch or feel them Services cannot be inventoried Services cannot be patented Services cannot be readily displayed or communicated Pricing is difficult Example: Healthcare Services Difficulty in evaluation before & after purchase Implication for Service Provider Use Tangible symbols to communicate about service quality

Tangibility Spectrum
Salt

Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets

Intangible Dominant

Tangible Dominant

Fast-food Outlets

Advertising Agencies Airlines Investment Management Consulting

Teaching

Characteristics of Services

Heterogeneity
Since services are performances produced by people no two services are identical Service delivery and customer satisfaction depends on employee actions Service quality may depend on many uncontrollable factors There is no sure knowledge that service delivered matches what was planned and promoted Example: Tax Accountants can have different skills & knowledge for preparing tax returns Challenge: Provide consistently high quality service Implication for Service Provider Expend considerable time & effort in selecting, training, managing & motivating employees

Characteristics of Services
Simultaneous Production & Consumption
Service providers create & deliver service as the customer is consuming it Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult Example: Eating meal at a Restaurant Challenge: Customer involvement, presence of other customers, no second chance is available to satisfy the customer Implication for Service Provider Customer training & standardization

Characteristics of Services

Perishability
Services cant be saved, stored or resold. It is very difficult to synchronize demand and supply with services Example: Airplane takes off with empty seat the sale is lost forever Challenge: Matching supply & demand (Fixed number of tables in restaurant, beds in a hospital) Implication for Service Provider Use variety of programs to match demand & supply

Difference Between Products & Services:

Five Major Differences: 1. Intangible nature of services - No physical measure of performance - Present communication challenges on offering, processes

2. Production and Consumption Inseparability - Production to occur in real-time - Presents time and space challenges to the marketer 3. Variability in Specifications and Delivery - Service delivery process not uniform - Presents challenges of standardization and quality control Perishable Nature of Services - Capacity utilization is not uniform results in variations in return on investment

4.

5. Lack of Ownership - No proof of transfer of ownership - Presents the challenge of the customer of a unique offering

Other Differences
CHARACTERSTICS Physical shape Process design Production Delivery Supply Producer status Life Title Physical presence of customer Customer involvement Type of technology Tangible Customer not involved Time spread Separated with production schedule Flexible Separable Longer life Ownership possible Hardly required Low / absent Generally hard GOODS Intangible Immediate effect on customer Spontaneous Along with production Inflexible Inseparable for services Still born No ownership possible Absolutely necessary for many services High Generally soft SERVICES

Other Differences (contd.)

CHARACTERSTICS Consumer reaction Repairs Replacement Pricing base Need satisfied Basis of competition Channel of distribution Standardization Facility location Product design Delayed Common Common Material Physical Technology Longer All over Near supply Physical product GOODS Spontaneous Generally Impossible Rare Labor More emotional Personalization Shorter Only for routine services Close to customer Role is more vital SERVICES

Other Differences (contd.)

CHARACTERSTICS Storage Inventory Quality control Workers skills Forecasting Facility layout Role of physical surroundings Possible Raw material Fixed Technical Longer

GOODS Not possible Personnel Variable Interaction Shorter

SERVICES

To enhance production Not so important

To accommodate customer physical & psychological needs Important

Difference between Marketing of Services & Marketing of Goods

Bases 1. Number of Variables 2. Production Process Marketing of Services Marketing of Goods

More variables exist in marketing ofLesser number of variables exist services here Service production process is a part of the marketing process. Service business, marketing & operations are more closely linked Manufacturing is a separate unit. So business, marketing and operations are not all that closely linked

3. Customer Interface

People on people. People are Goods on People as much a part of the product in customers mind as any other attribute of the product Mental Shelf Space Much more difficult. Promotional price cuts tend to erode hard fought positioning & image Physical Shelf Space Comparatively easy. Promotional price cuts dont have a great impact on positioning & image

4. Inventorying 5. Pricing

Role of Services in Economy

Adds on to GDP growth. GDP = Private Consumption + Gross Investment + Government Spending + Net Exports GDP = C + I + G + Nx Generates employment & career opportunities Opens many entrepreneurial opportunities Increased tax revenue Leads to all round development Better quality of living GDP is positively correlated with standard of living

Growth of Service Sector

Liberalization in regulatory framework

o o o This gives rise to innovation and high export earnings India is ranked 21st among exporters of services IT sector, BPO, outsourcing, consultancy, education, healthcare all are booming well equally.

Increased disposable income in the hands of people Changing consumer attitude & lifestyle Increased productivity & automation in agriculture & industry (manufacturing) Faster technological developments

Factors Stimulating Transformation Of Services Economy

Government Policies
Changes in regulation New rules to protect customers, employees & environment

Social Changes
Rising customer expectations More affluence Rising ownership of computers & mobile phones Immigration

Business Trends
More strategic alliances Marketing emphasis by non profits Growth of franchising

Factors Stimulating Transformation Of Services Economy

Advances in I.T.
Convergence of computers & telecommunication Wireless networking Faster & more powerful soft wares Digitalization of text, graphics, audio & video Growth of internet

Internationalization
More companies operating on transnational basis Increased international travel International mergers & alliances

Factors Stimulating Transformation Of Services Economy

All this leads to: Increased demand for services & more intensive competition Service innovation stimulated by application of new & improved technologies Increased focus on Services Marketing & Management

Technology is a Key Driver of Service Innovation

Technological developments help to:
o Automate & speed up processes o Reduce costs (and perhaps prices) o Facilitate service delivery o Reduce risk perception o CRM relate more closely to their customers & offer them more convenience o Add appeal to the existing products o Make it possible to develop new kinds of services

Technology is a Key Driver of Service Innovation

Radically alter ways in which service firms do business:
With customers (new services, more convenience) Behind the scenes (reengineering, new value chains)

Create relational databases about customer needs and behavior, mine databanks for insights Leverage employee capabilities and enhance mobility Centralize customer servicefaster and more responsive Develop national/global delivery systems Create new, Internet-based business models